IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
January 20, 2009
No. 08-30364 Charles R. Fulbruge III
Clerk
LESLEY SIMMONS ST. GERMAIN; HILLARY ROSE HILLYER; MELISSA
BRANIGHAN LUMINAIS
Plaintiffs-Appellants
v.
D DOUGLAS HOWARD, JR.; D DOUGLAS HOWARD, JR & ASSOCIATES;
HOWARD & REED, ATTORNEY AT LAW
Defendants-Appellees
Appeal from the United States District Court
Eastern District of Louisiana
Before GARWOOD, GARZA, and OWEN, Circuit Judges.
PER CURIAM:
Plaintiff-Appellants Leslie St. Germain et al. (“Appellants”) appeal the
district court’s dismissal of their civil Racketeer Influenced and Corrupt
Organizations (“RICO”) suit against Defendants-Appellees D. Douglas Howard
and the two law firms with which he is affiliated (“Appellees”). Appellants
alleged violations of RICO and various state law claims arising out of Appellees’
prior legal representation of Appellants. The district court dismissed Appellants’
RICO claims with prejudice under FED. R. CIV. P. 12(b)(6), and dismissed the
pendent state law claims without prejudice pursuant to its jurisdiction under 28
No. 08-30364
U.S.C. § 1367. The district court also denied Appellants leave to amend their
complaint under Fed. R. Civ. P. 15(a) and taxed costs to Appellants.
We review de novo the dismissal of a complaint under FED. R. CIV. P.
12(b)(6), Elsensohn v. St. Tammany Parish Sheriff's Office, 530 F.3d 368, 371
(5th Cir. 2008), and review for abuse of discretion the district court’s refusal to
allow a party to amend its pleadings, taxing of costs to a party, and dismissal of
pendent state law claims. See Robertson v. Plano City, 70 F.3d 21, 22 (5th Cir.
1995); 28 U.S.C. § 1367(c); McLeod, Alexander, Powel & Apffel, P.C. v. Quarles,
894 F.2d 1482, 1488 (5th Cir. 1990).
The district court did not err in dismissing Appellants’ RICO claims under
Rule 12(b)(6). Claims under RICO, 18 U.S.C. § 1962, have three common
elements: “(1) a person who engages in (2) a pattern of racketeering activity, (3)
connected to the acquisition, establishment, conduct, or control of an enterprise.”
Abraham v. Singh, 480 F.3d 351, 355 (5th Cir. 2007). A pattern of racketeering
activity consists of two or more predicate criminal acts that are (1) related and
(2) amount to or pose a threat of continued criminal activity. Id. The predicate
acts can be either state or federal crimes. In their complaint, Appellants alleged
that the predicate acts committed by Appellees were mail and wire fraud.
However, the district court found, and Appellants acknowledged, that the
“patterns of racketeering activity” they allege are at worst violations of the rules
of professional responsibility.1 Because Appellants have not alleged the requisite
1
The allegedly fraudulent acts that are at the heart of Appellants’ RICO case involve
the following: (1) violation by Appellees of multiple provisions of the Louisiana Rules of
Professional Conduct; (2) Appellees using “multiple business identities” in the course of their
legal representation of Appellants, as evidenced by billing statements sent from “Howard and
Reed” and “Howard, Reed and Taylor, Attorneys at Law” (despite the existence of a contractual
arrangement solely between “D. Douglas Howard and Associates” and Appellants); (3)
Appellees charging Appellants non-refundable minimum fees in advance, and performing
unauthorized and/or overbilled work; (4) Appellees engaging in unauthorized sharing of fees
with parties not identified in the contract between Appellees and Appellants.
2
No. 08-30364
predicate criminal acts under RICO, they have not met the pleading standard
of Rule 12(b)(6).2
In holding that Appellants were required to demonstrate detrimental
reliance when alleging injuries that resulted from fraud under RICO, however,
the district court relied on Fifth Circuit precedent that is no longer good law.
See Summit Props. Inc. v. Hoechst Celanese Corp., 214 F.3d 556, 562 (5th Cir.
2008). The Supreme Court recently held that no reliance requirement exists for
civil causes of action under RICO for victims of mail fraud. Bridge v. Phoenix
Bond & Indem. Co., 128 S.Ct. 2131, 2139-40 (2008). Thus, to the extent that our
prior cases are in conflict with Bridge, they are overruled.
Notwithstanding the fact that reliance is no longer required to be pled,
Appellants have still not sufficiently pled the predicate acts of mail and wire
fraud, and are unable to show that they were injured by a violation of RICO.
The district court’s dismissal of the RICO claims under Rule 12(b)(6) was
therefore ultimately proper. For this reason, the district court also did not err
in dismissing Appellants’ state law claims. The district court has discretion to
dismiss pendent state law claims, and may decline to exercise supplemental
jurisdiction over such claims where it has dismissed claims over which it had
original jurisdiction. 28 U.S.C. § 1367(c).
Finally, the district court did not commit error in denying Appellants the
opportunity to amend their complaint and in taxing costs to Appellants.
Appellants had several opportunities to state their best case. See Price v.
2
The parties dispute which standard of pleading applies to civil RICO claims in this
case. Appellants argue that the pleading standard articulated in the Supreme Court's decision
in Bell Atlantic v. Twombly, 127 S.Ct. 1955, 1974 (2007), is applicable to civil RICO claims.
Twombly jettisoned the minimum notice pleading requirement of Conley v. Gibson, 355 U.S. 41
(1957), and instead required that a complaint allege enough facts to state a claim that is plausible on
its face. In re Katrina Canal Breaches Litigation, 495 F.3d 191, 205 (5th Cir. 2007). Appellees
contend that Twombly is not relevant to civil RICO actions. Because Appellants do not meet
either the more liberal Conley standard or the Twombly plausibility standard, we do not need
to decide in this instance whether Twombly applies in the RICO context.
3
No. 08-30364
Pinnacle Brands, Inc., 138 F.3d 602, 608 (5th Cir. 1998) (finding no abuse of
discretion in district court’s denial of opportunity to amend when plaintiffs had
already filed their original complaint, their RICO case statement, and their
response to defendants’ Rule 12(b)(6) motion). The district court also did not
abuse its considerable discretion in taxing costs to Appellants. FED. R. CIV. P.
54(d); see McLeod, Alexander, Powel & Apffel, P.C. v. Quarles, 894 F.2d 1482,
1488 (5th Cir. 1990).
Appellees have moved under Rule 38 for sanctions and double costs and
attorney’s fees to be assessed against Appellants. The Court may assess
sanctions and single or double costs and attorney’s fees against a party if their
appeal is deemed frivolous. Under Rule 38, “a frivolous appeal is an appeal in
which ‘the result is obvious or the arguments of error are wholly without merit.’”
Buck v. United States, 967 F.2d 1060, 1062 (5th Cir.1992). Though this is a close
case given that Appellants clearly have not presented a cognizable civil RICO
claim, we decline to assess sanctions and double costs and attorney’s fees against
Appellants.
For the foregoing reasons, we AFFIRM the judgment of the district court,
and DENY the motion for sanctions and double costs and attorney’s fees.
4